In another topsy-turvy trading session, natural gas futuresfinished well off daily highs, but still in positive territoryyesterday as players bid up the market in the morning only to dumpit lower after fresh storage data was released. The Januarycontract traded within a wide, 50-cent range and closed 22.4 centsstronger at $9.326. Most of the out-months were much more staid,with May through December 2001 contracts only able to tack on a1.5-cent gain. Illiquid trading contributed to the volatility asless than 45,175 contracts changed hands.

According to the American Gas Association 158 Bcf was pulledfrom underground storage facilities for the second week in a row,reducing working gas levels to 2,113 Bcf or 64% full. Most traderssurveyed by NGI were quick to dub the report neutral as it fellneatly within the 145-170 Bcf range of expectations. However, theprice move that preceded the storage announcement was anything butneutral. Within 10 minutes of the release, prices tumbled 40 centsto notch yesterday’s $9.25 low.

Storage is now 630 Bcf or a whopping 23% behind year-ago figuresand 456 Bcf or 18% behind the five-year average. Last year at thistime a withdrawal of 116 Bcf was seen and the five-year average is112 Bcf. Next week the historical comparisons are more stout, withlast year’s drawdown at 173 Bcf and the five-year averagewithdrawal at 148 Bcf.

Looking ahead, traders are growing increasingly concerned withthe market’s ability to forge higher on dwindling estimated volume.Specifically, Tim Evans of New York-based IFR Pegasus points to themarket spiking higher in Access trade as traders attempt togenerate the most upside price appreciation for the fewestcontracts expended. “Either the market rises to a point where ittriggers heavy volume in a blow-off top or the market is slappeddown once it encounters stiffer opposition.”

That said, Evans remains bullish but warns that January willhave a difficult time overtaking the Dec. 11 highs in the $9.60-86area. “These highs may therefore hold or perhaps yield only a minornew high before the market succumbs to a correction. If not, thereis likely to be more selling associated with the even $10.00level,” he said.

In last night Access trading the market was already in theprocess of testing resistance as the January contract checked 32.8cents higher to trade at $9.654 as of 6 p.m. (EST).

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